Santander Consumer USA, the lender behind Chrysler Capital, is heightening its scrutiny of its dealership partners, saying it wants to end relationships with some stores and deepen successful ties with others. Fiat Chrysler dealerships in the lender’s portfolio could fall into either group.
“We need to separate out those relationships, to identify ways to grow those relationships with the right dealers, and look for ways, frankly, to discontinue relationships with dealers that don’t do the right things for customers or for Santander Consumer,” COO Rich Morrin said during an Investor Day presentation on Feb. 23.
“Regulatory expectations have increased rather dramatically,” he said. Santander Consumer, the Dallas unit of a Spanish financial company, started providing retail loans to FCA US’ Dodge, Chrysler, Jeep, Ram, and Fiat dealers under the Chrysler Capital brand in 2013 and later added retail leases as well as floorplan and commercial loans.
Santander Consumer said that in addition to looking at typical measures such as dealerships’ delinquency trends and losses vs. expectations, it’s also screening for sudden spikes in volume, “misrepresentation frequency,” regulatory compliance failures and even negative media coverage.
The lender is also compiling customer complaints, Morrin said. “We now log that information and mine that information into early warning indicators about dealership performance and portfolio performance,” he said.
Santander Consumer has come under fire from U.S. regulators in the past few years. In 2015, the Consumer Financial Protection Bureau alleged it had found “statistical disparities” in dealer reserve within Santander Consumer’s portfolio and referred the matter to the U.S. Department of Justice. In turn, the DOJ started an investigation under the Equal Credit Opportunity Act.
Also in 2015, Santander Consumer accepted a $9.4 million consent order with the DOJ for alleged violations of the Servicemembers Civil Relief Act. Those actions were not specifically aimed at the Chrysler Capital part of the business.
Santander Consumer piloted a dealer incentive program called VIP for FCA dealers last year. This year, it plans to roll out the program nationwide.
“The Chrysler Capital VIP Program was successfully tested with approximately 500 dealers in 2016, and more than 1,000 dealers were added to the program in 2017,” the lender told Automotive News in an email on Tuesday.As of Jan. 1, FCA had 2,440 U.S. dealerships, according to the Automotive News Data Center.
Santander Consumer said in the email the program is designed to increase loyalty with FCA dealerships based on various levels of rewards for incremental growth. “Additionally, Chrysler Capital offers highly competitive incentives to floorplan dealerships to reward them for their loyalty,” the lender said.
Morrin said the VIP program for FCA dealerships is directly related to efforts to weed out dealerships, including FCA stores. The company said it has a network of more than 15,000 mostly franchised dealerships, representing FCA stores, non-FCA franchised stores and some independents.
“This is going to be a differentiator, going back to our dealer performance management process. It’s going to be a differentiator to determine the right dealer relationships,” Morrin said. “What we’re trying to do through this process, both in Chrysler and in our core [mostly subprime] business, is really separate dealers into the right relationships, and those relationships that don’t work.”